Real estate has proven to be a lucrative investment over the long term. Buying property has turned out to be an effective strategy to provide you with retirement income through earning income from collecting rent as well as earning capital gains from appreciating real estate values. However, if you are looking to invest in real estate to collect rental income, it may be a good idea to first take into consideration the challenges property owners may face.
Locating the right property
Prior to earning rental income as a property owner, you will first need to find the right property to buy which fits certain criteria that is necessary for your investment to be profitable and worthwhile. The price of the property should be low enough to provide enough margin to allow you to make profit from renting to tenants. However, finding the right price can be difficult when the market is overpriced.
Preparing property for tenants
It is possible the property you decide to purchase is not ready to be put up on the market to rent to tenants. There may be structural problems needing to be resolved to comply with applicable laws and regulations. Aesthetic renovations may be required to make the property presentable. This can include repainting walls, putting in new flooring or hiring a professional house cleaning company.
Finding the right tenant
Once your rental unit has been properly prepared to be put on the market, it will be time to focus on attracting the right tenants for you. Many property owners will opt to hire a professional property management firm to sift through tenant candidates for you.
Another option would be to inquire within your own existing network of friends, family, and acquaintances to see if somebody may be looking for a place to rent. You can also take advantage of the multiple online platforms for connecting property owners with renters. However, be aware that a thorough search for the right tenant can take considerable time and effort.
Maintenance
You should be aware as a property owner you will still have continuous tasks to complete after you have found the right tenant. Property owners will need to perform routine maintenance of rental properties that will experience wear and tear from tenants going through their daily routines. You may have to deal with clogged drains, broken garage doors, roommate problems and leaky pipes. Property owners will also be responsible for replacing or repairing broken appliances, such as microwaves, refrigerators, and dishwashing machines.
Problem tenants
There are some tenants who are just more difficult to deal with for one reason or another. Some may always pay their rent late while others may call constantly about insignificant issues. You may have ended up with a tenant which caused considerable damage to the property. This damage could include holes in the wall or badly stained carpets. It is even possible that a problematic tenant ends up suing you in court for some reason.
Have a financial plan
It is important to have enough cash to deal with issues which may arise as a property owner. This can include major repairs, replacing appliances, property taxes or even dealing with a costly lawsuit. Developing a comprehensive financial plan will allow you to be more prepared.
Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice.